3 Things Every Driver Should Know About Rideshare Insurance

Rideshare insurance is a tricky topic, and many drivers still don’t understand how vitally important obtaining a special rideshare-specific policy is.

While these types of insurance policies do cost extra, they are worth every penny, and ensure that drivers are covered before, during, and after passenger pickups.

Here’s 3 important things about rideshare insurance every driver should know.

1. Unless you have a rideshare insurance policy, or a policy with a rideshare endorsement, your personal auto insurance will not cover you if you have an accident while you’re driving with Lyft and Uber.

Many drivers assume that Lyft and Uber provide full insurance coverage for drivers, but that is not actually the case. Drivers without a rideshare policy may run into problems when issues like accidents arise.

To better understand when each type of coverage works, we need to break down the “periods”, or times when each different type of coverage applies.

Uber and Lyft divide rideshare into three periods:

  • Period 1: Vehicle is being used, and the rideshare app is online.
  • Period 2: Vehicle is being used, the rideshare app is online, and a passenger has been accepted but has not yet been picked up.
  • Period 3: Vehicle is being used, and the passenger(s) is either being transported or has arrived at the destination and is exiting the vehicle.

Period 1

Before you accept a ride request (period 1), Uber and Lyft only provide contingent liability coverage. The coverage amounts are $50,000/person and $100,000/accident for injury liability, and $25,000 in total property damage.

Contingent coverage means Uber and Lyft provide the liability coverage if you don’t maintain coverage at those amounts on your personal policy, or if your personal policy will not cover the incident. Liability coverage covers injury to passengers and property. Property, in this case, means damage to the other car, not yours.

The main problem here is that if you have an accident during period 1, Uber and Lyft will ask you to check with your insurer to see if they will provide the liability coverage. If you don’t have a rideshare policy, your insurer will not provide coverage. Even worse, they will likely cancel your policy.

The reason for this cancellation is that personal auto insurance policies do not cover commercial use of the vehicle. And yes, insurance companies consider driving for Uber or becoming a Lyft driver commercial use.

Additionally, neither company provides any collision coverage during period 1. This means you would be responsible for fixing any damage to your vehicle. Even if you have collision coverage on your personal policy, it will not come into force if your insurer is aware you were driving with Lyft or Uber.

Lying to your insurance company in this situation is not a good idea. In fact, it’s fraud, and if your insurance company found out, they could sue you.

In other words, if you’re waiting for a ride request, you are not fully covered by Uber or Lyft, and you’re not covered by your personal auto policy, unless it’s a rideshare policy.

2. Uber and Lyft do provide coverage once you’ve accepted a ride (period 2) or have a rider in the vehicle (period 3), but the collision coverage is contingent.

Periods 2 and 3

Uber and Lyft do provide insurance for drivers once they’ve accepted a ride request (period 2), and while a rider is in the vehicle (period 3). However, they only provide full liability coverage.

Both Uber and Lyft’s collision coverage during periods 2 and 3 are contingent on you having collision coverage on your personal policy. Additionally, the deductibles on Uber and Lyft’s collision coverage are very high. Uber’s deductible is $1,000 and Lyft’s is a whopping $2,500.

So if you have a car accident on your way to pick up a rider, or with the rider in the car, the situation is a little better. You are covered for injuries to passengers, and damage to the other vehicle or vehicles. If you have collision coverage on your personal insurance, then the damage to your vehicle is also covered.

But, even with Uber or Lyft’s collision coverage, your out of pocket expenses to fix your car will be $1,000 if you’re driving for Uber and $2,500 if you’re driving with Lyft. If it’s a small fender bender, you could wind up paying most or all of the repair costs. And with Uber rates as low as they are, that could end up taking a ton of trips to earn back.

For a well-known worker in the corporate world, this might not seem like a lot, but to the average rideshare driver that just gets by (especially with Uber’s low rates), it would take a lot of trips to recoup that cost. Play it safe and get a rideshare policy.

3. Rideshare insurance policies are now widely available, and relatively inexpensive.

Luckily, there is a solution to this issue. Rideshare policies are now available in 49 of the 50 states (North Carolina is the holdout), from companies such as Allstate, Geico, State Farm, Farmers Insurance, and many others. Even better, you can usually add rideshare coverage to a personal auto insurance policy for between $5-$20 per month, depending on the level of coverage you select.

MUST READ: Our Favorite Rideshare Insurance Policies [Outlined in Detail]

When shopping for rideshare insurance, you’ll run into two main types of rideshare policies; gap coverage and extended coverage.

Gap Coverage

Photo Credit: Bassett Insurance Group

Gap coverage extends a personal auto policy through period 1, and is one of the most common coverage options offered by providers like Allstate, Mercury, American Family, USAA, Safeco, Farmers, and Travelers.

If you’re online waiting for a ride request, your personal auto insurance policy is in effect. Once a ride request comes in, the Uber or Lyft insurance takes over.

In addition to covering you during period 1, Allstate also offers deductible gap coverage of up to $2,500 during periods 2 and 3. This can help reduce your out of pocket expenses if you have an accident on the way to pick up a rider, or have a rider in your vehicle.

I expect a number of the other companies who offer gap coverage may start adding deductible gap coverage in the future to compete with Allstate.

Extended Coverage

Other companies offer extended coverage, which extends parts or all of a personal auto policy through periods 1, 2, and 3.

In some cases, the extended coverage acts as primary coverage through all 3 periods. This takes Uber and Lyft out of the equation and means you only have to deal with your insurance company. This type of coverage is offered by State Farm, Geico, Progressive, Erie, and Metlife.

State Farm’s rideshare coverage extends your personal policy through all three periods with the exception of liability coverage, which Uber and Lyft cover anyway.

Photo Credit: State Farm

Metlife provides full coverage through all three periods, but only on the Lyft platform.

Erie Insurance, Progressive, and Geico extend coverage through all three periods on both platforms. Geico and Progressive policies tend to be closer to commercial policies in terms of cost, especially for full-time drivers.

With the exception of Erie, extended rideshare insurance policies tend to be significantly more expensive than gap policies, primarily because they provide a lot more coverage.

My Take

Rideshare insurance policies are not only a “must” for every rideshare driver, but worth every penny. They reduce liability and allow drivers to focus on what they do best: driving.

These policies have come a long way since being introduced just a few years ago, and are continually being fine-tuned to become more affordable to drivers all around the world.

So, if you’re already a rideshare driver, or you’re thinking of signing up for Lyft or Uber, be sure to purchase a rideshare insurance policy so you’re fully protected. Spending that $5 to $20 a month now could save you thousands down the road. Get covered today!

Do you have a rideshare insurance policy? What insurance company is the most affordable? Let us know in the comments below!

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